Italgas is a regulated gas distribution utility with a relatively supportive business-risk profile: essential infrastructure, stable regulated revenues, and strong operating profitability. In 2022, revenue and operating income rose to about €2.31 billion, operating profit increased to €641 million, and net profit increased to €436 million. EBITDA-like cash earnings are also robust, with operating profit plus depreciation/amortization of roughly €1.12 billion.

However, the balance sheet and cash-flow profile show rising funding pressure:

- Financial debt is substantial: short- and long-term financial liabilities were about €6.55 billion at year-end 2022, while cash fell sharply to €452 million from €1.39 billion.
- Net debt therefore increased materially, to roughly €6.1 billion.
- Equity increased to €2.39 billion, but leverage remains high for a regulated utility.
- Investing cash outflow was very large at about €1.28 billion in 2022, including significant intangible investments and consolidation/business-unit investments.
- Free cash flow after investing was materially negative, and cash decreased by about €940 million during the year.
- Dividends remained meaningful at about €253 million, adding to funding requirements.

These factors create a legitimate capital-structure optimization rationale. Hybrid bonds could receive partial equity credit from S&P and therefore support adjusted credit metrics, particularly FFO/debt and debt/capital, while helping fund continuing regulated asset-base growth and acquisitions.

That said, the case for a high hybrid allocation is limited:

- Italgas had no hybrid bonds outstanding and had never issued hybrids. This is a strong signal that hybrids are not yet a core financing tool for the company.
- The company remains a regulated utility with resilient earnings and no evidence of acute downgrade pressure or a need to rely heavily on hybrids to preserve investment-grade status.
- 2022 market conditions were much less favorable than 2020-2021: euro swap rates rose sharply, and subordinated nonfinancial IG spreads also widened. A new hybrid would likely be meaningfully more expensive than existing senior debt.
- The annual report data shows high investment needs, but not a clearly transformational capex/M&A program requiring maximum hybrid use.
- Because there is no existing hybrid base, moving immediately toward the 15% S&P equity-credit cap would be aggressive.

Overall, a modest hybrid issuance would be reasonable as a first-time instrument to provide rating flexibility and help manage leverage after a year of heavy investment and cash drawdown. But given the lack of prior hybrid issuance and the higher hybrid cost environment, the advisable level should remain low rather than medium or high.

<answer>3.75%</answer>